Isco's a no-go for City: Pellegrini misses out on top target as playmaker signs five-year deal to join Ancelotti at Real Madrid

Manchester City have missed out on their top summer transfer target after Real Madrid confirmed the signing of playmaker Isco on a five-year deal from Malaga.

City had been in pole position for
the Spain Under 21 star's signature after his mentor and former manager
Manuel Pellegrini succeeded Roberto Mancini in Manchester but the highly-rated youngster chose to stay in Spain.

'Real Madrid incorporates a new project with one of the best Spanish football players,' the club said in a statement.

Wanted: Isco has previously admitted he is excited by the prospect of joining Real Madrid

Champion: Isco starred in Spain's victorious run to winning the U21 European Championships

'Francisco Roman Alarcon - Isco - plays at the Bernabeu for the next five seasons.'

The financial terms of the deal were not disclosed, but reports in Spain suggest the fee will be in the region of €27million.

Isco recently starred as Spain's Under 21 team retained the European Championship, scoring three times in their successful campaign in Israel.

He was the winner of the prestigious European Golden Boy award in 2012, and last season played a major role as Malaga reached the quarter-finals of the Champions League - losing narrowly to eventual finalists Borussia Dortmund - and finished sixth in La Liga.

Isco made 45 appearances in all competitions for Malaga last term, scoring 12 times, and made his senior Spain debut against Uruguay in February.

'Imagination and speed are some of the qualities that define this midfielder... a recent champion with Spain at Euro Under 21 and at age 21 already capped by the senior team,' Madrid's statement added.

'[He is] a player with enviable technical quality, chutzpah and imagination.'

Setback: Manuel Pellegrini has missed out on top transfer target Isco

Malaga also confirmed the deal in a
statement on the club website, which read: 'Malaga Football Club has
reached a transfer agreement with Real Madrid for Francisco Alarcon
Suarez "Isco".

'Malaga CF would like to thank "Isco", and his family, for his commitment, involvement and flawless performance.'

Madrid president Florentino Perez
first revealed the agreement with Malaga in a radio interview last
night, in which he confirmed the player would be presented 'next week
after the medical'.

New coach Ancelotti was asked about the former Valencia man yesterday at his press conference and said: 'From what I have seen of him, it's clear he has a lot of quality.

'Spain's Under 21 side has a lot of great players and he is one of the best.

'He could get into any team in the world, so he could also play for Madrid.'

Isco is Madrid's second acquisition
of the summer after they re-signed full back Dani Carvajal on a buy-back
deal from Bayer Leverkusen.

Meanwhile, Sergio Ramos has given his
backing to Ancelotti and revealed he is looking forward to wiping the
slate clean after a difficult final season under Mourinho.

The defender came in for public
criticism on more than one occasion from the Portuguese and was also
dropped from the starting line-up for a Champions League tie with
Manchester City.

'People have spoken very well about Ancelotti to me, both on a personal and a professional level," Ramos told AS.

Outbound: Carlos Tevez completed his move to Juventus after four years with Manchester City

'At last we have a coach and I'm delighted about that.'

The Italian has been labelled a 'peacemaker' by the Spanish press and Ramos hopes his arrival will mark a fresh start.

'We hope that the bad times have come to an end,' he said.

'There have been tough spells but
everything passes. We need to remember the good times and not be
resentful or speak bad about what has happened. I'll remember the
positive aspects and I can forget about the other aspects easily. Life
goes on.

'I'm fine at Madrid, I can't complain. I'm happy there, which is the most important thing, and I would like to continue there.'

Real are also chasing Tottenham forward Gareth Bale, with Cristiano Ronaldo's future at the Bernabeu uncertain.

City must now reassess their summer transfer targets. Although
they have signed central midfielder Fernandinho and winger Jesus Navas,
Isco was a top priority for Pellegrini.

The 2012 Premier League champions are
also on the hunt for another striker after Carlos Tevez completed his
move to Juventus yesterday.